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SyQuest eyes Chapter 11

SyQuest suspends operations and considers a Chapter 11 filing as its stock price falls under a buck.

SyQuest said today it "suspended operations" and may file for reorganization under Chapter 11 of the U.S. Bankruptcy laws.

SyQuest, a struggling portable storage maker, has requested that its stock halt trading on the Nasdaq national market while it reviews its operations. "The company plans to maintain limited support to its customers," the company in a statement.

In recent weeks, SyQuest has suffered a credit crunch. One of its lenders cut the company's credit line to $10 million from more than $30 million, after the company failed to meet lending requirements.

And efforts to secure a $13 million loan from its investors also failed to materialize, since investors had requested SyQuest secure an additional funding source, according to Securities and Exchange Commission filings.

The company, which was once a high-flier before losing market share to Iomega, has seen its stock tumble from over 5 a year ago to under 50 cents today.

Last week, the company's stock jumped more than 40 percent, yet company officials did not give any explaination for the rise in stock price.

Last July, SyQuest hired CIBC Oppenheimer to explore financing options. Yet analysts had said any potential buyer probably wouldn't offer more than a few cents per share for the troubled company.

SyQuest has been unable to move forward, despite a management reorganization more than a year ago and a more recent restructuring in August when the company cut its workforce in half.

The cuts were to leave SyQuest with roughly 1,000 employees worldwide.

The company posted a loss of $42.5 million for the quarter, compared with a loss of $10.7 million in the year ago period. Revenue, however, jumped 41 percent to $44.7 million for the period.

SyQuest executives could not immediately be reached for comment.